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Understanding Loyalty, Predicting Growth – NPS Surveys Explained

“All companies seek to grow. And growth—profitable, sustainable organic growth—occurs most often when customers and employees love doing business with a company and sing its praises to neighbors, friends and colleagues.” Net Promoter Score

Before you start creating and sending NPS surveys, it makes a lot of sense to familiarise yourself with the basics behind Net Promoter Scoring. Here’s what you need to know.

What is Net Promoter Score?

Net Promoter Survey is a popular management tool used by businesses all over the world to identify loyalty via relationships with customers. It’s an exciting alternative to traditional customer satisfaction research because it correlates so well with increases in revenue. In fact it’s used by more than two thirds of Fortune 1000 companies.

NPS measures customer experiences and uses the information to predict growth. These days it’s the key measurement used by marketers and business leaders to drive their customer experience management programs.

The score’s range runs from minus 100 to 100, measuring the willingness of people to make word of mouth recommendations about a business’ products or services. The results are used to gauge overall satisfaction and brand loyalty.

How did NPS start? What is its history?

Net Promoter Score was created by Fred Reichheld, Bain & Company, and Satmetrix, in the early 21st century. Using data from Satmetrix, they tested a suite of questions to establish how well the answers correlated with actual customer behavior. And one simple yet powerful question performed better than all the rest:

How likely is it that you would recommend our (company/product/service) to a friend or colleague?

If you’ve ever been asked this question online, you’re not alone. Billions of us have probably answered it, often more than once.

Net Promoter’s inventors soon discovered that high NP scores tended to correlate with repurchases, referrals and other positive actions that drive business growth. The effect was so powerful that the question soon became a reliable proxy.

These days NPS surveysare the prime business tool for those wanting to measure consumer loyalty. It’s the ultimate authoritative question to ask people when you want to gain meaningful insight.

Which businesses use NPS?

Net promoter survey usage is widespread. It is harnessed by businesses in the air transportation sector, heavy industry, fast moving consumer goods, retail, financial services and healthcare, by private and public sector companies, the tech and telecoms industries, and the media. Online giants like Airbnb and Amazon use it, as do digital marketing and comms platforms like Hubspot and Slack. In short, it’s universal.

How is NPS calculated?

When someone receives your NPS email they answer one question: “On a scale of 0-10, how likely is it that you would recommend [company name] to your friends, family or business associates?”

People who score their experience at 6 or below are your Detractors, those who score of 7 or 8 are your Passives, and people who award you a 9 or 10 are your Promoters.

You calculate your NPS by subtracting the Detractors from the Promoters then dividing the result by the total number of people who responded.

A score of more than 50 is ‘excellent’.

A score of 70+ is ‘world class’.

Global NPS standards regard any score above 0 as ‘good’, since it reveals that the majority of your customers feel loyal to your brand.

In a nutshell the more Promoters you identify, the better shape your business is in.

NPS Survey example

Vanarama, the van hire experts, understand the importance of granular NPS feedback. They use our surveys to support customer lifecycle management excellence, collecting feedback at key touchpoints along the customer journey. In their words it’s a “superb pulse on customer feedback.”You can read the full Case Study here.

Making the most of NPS surveys

What are the top 3 reasons why people recommend or don’t recommend your business? It’s something every business owner, Marketing Director and CEO needs to know.

The businesses that get the most out of NPS are those that take the data and map it back to their marketing and communications strategies, customer service best practices, and product development planning.

It works because tracking how likely your customers are to recommend you is the first step to achieving a genuinely customer-driven culture, one that really is dedicated to continual improvement.

Thanks to NPS they can hone their interactions with customers to perfection. They can use their scores to drive better product development, creating products their audiences actually desire, want or need. They can harness NPS to reduce the number of employees that leave, and to minimise the cost and inconvenience of churn. And it is a reliable indicator of increasing word-of-mouth referrals, a vital marketing channel.

In our opinion, and that of a multitude of successful companies, large and small, NPS is the leading indicator of future business growth. The more advocates you have, the lower your customer acquisition costs, and the more successful your customer service team will be.